EUROPEAN RETAIL INVESTMENT UP 45% YEAR ON YEAR AS GERMANY DOMINATES MARKET
Retail investment in Europe reached near record levels in Q3 2015 with €17 billion transacted, a 45% increase on Q3 2014 levels. Following a strong first half, the German retail market overtook the UK to become the biggest in Europe. Q3 2015 was the strongest quarter on record for Germany since 2006. Shopping centres remain the preferred sector for cross regional investors, with retail warehouses increasing in popularity; attracting 24% of cross regional retail investment in Europe.
The Nordic markets have also seen a high retail investment turnover so far this year; with investment in the first nine months of 2015 already more than double that of the whole of 2014. Despite a 12% increase to €4.3 billion from Q2 to Q3, the UK slipped behind Germany in terms retail investment turnover. The UK saw particularly high levels of retail warehouse investment, with over €1.5 million changing hands. After several consecutive weak quarters, the CEE reported significant uptick in investment, with €1.2 million invested in what was its strongest quarter for retail investment since 2011.
Retail yields decreased in Q3 2015, with the CBRE EMEA Rental Yield Index down by 12 bps, leaving it 39 bps lower than in Q3 2014. Yield compression in several CEE markets this quarter (most pronounced in Czech Republic) means that yields fell faster outside the euro area than inside it. Shopping centre yields fell steadily throughout the quarter in European markets. With France, Portugal, Norway and Ireland experiencing the sharpest falls in Q3
Prime high street retail rents were up by 0.5% Q-on-Q and have risen 6.7% year on year. There were marked increases in the Nordic markets, particularly Stockholm and Oslo. European shopping centre rents remained fairly steady with little movement since Q2.
After a strong performance throughout the year, Q3 2015 is the second strongest quarter on record, just behind Q4 2006. The German and Nordic markets have had an exceptional quarter. In Germany the growth was largely the result of an increase in activity by domestic purchasers. Local buyers invested €3.2 billion in the country, up 167% on the previous quarter. For the Nordics, attention was focussed on the high street offering in Oslo, the supermarket sector in Finland and domestic purchasers favouring retail warehouses and shopping centres in Sweden.